Web hosting company imposes penalty taxes on Kenya
Tuesday May 4th 2021
BY CONSTANT MUNDA
- Bulgarian web hosting company SiteGround has stopped recruiting new customers in Kenya and has cited high compliance costs.
- The company blames costly tax rules for its exit and closes the door on startups looking to set up online services on a shoestring.
Bulgarian web hosting company SiteGround has stopped recruiting new customers in Kenya and has cited high compliance costs.
The company blames costly tax rules for its exit and closes the door on startups looking to set up online services on a shoestring.
“Due to new local regulations (mainly tax), we recently stopped offering new registrations for a number of countries, and Kenya is one of them,” replied SiteGround to a Kenyan web designer who tried unsuccessfully to sign up for an account for a client via Twitter.
“Compliance with these regulations would be expensive for us, so it would not be possible for us to offer our product there.”
Industry players have linked SiteGround’s decision to the introduction of a digital service tax of 1.5 percent on the value of goods or services delivered and sold online from January 2nd.
The Sofia-based company with data hubs in the US, UK, Germany, the Netherlands, Singapore and Australia offers free to affordable hosting services such as domain listing, enterprise solutions and email hosting.
Dennis Macharia, web designer at Rynode Solutions Ltd, said that SiteGround’s hosting for websites like WordPress and Joomla is popular with Kenyan micro-businesses because of its faster customer support and higher availability unlike some of its competitors.
“It’s a big loss for micro businesses looking to set up online,” he told Business Daily.
“SiteGround is one of the best in the world. When I have problems with my customer account, they react quickly, while other platforms don’t even offer customer support.”
The Kenya Revenue Authority (KRA) is targeting approximately 1,000 companies “earning or making revenue from Kenya” through a digital marketplace to register in six months through June 2021 and is targeting Sh5 billion.
“The way taxes have been structured lately is likely to reduce the potential tax throughput for the KRA,” said Kamotho Njenga, general secretary of the ICT Association of Kenya.
“The tax officer may think they are innovating, but they may be doing a disservice to their earnings collection because not every investor goes public about why they … left a certain destination.”
Some of the countries that have enforced or intend to implement digital service taxes are India, Italy, France, Great Britain, Mexico, Hungary, Austria, the Czech Republic, Turkey, Belgium and Spain.